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The Key Differences Between The Natural Gas Markets In Asia, Europe And North America

1687 words - 7 pages

The key differences between the natural gas markets in Asia, Europe and North America

November 2012

Table of Contents

Summary 3
Overview 4
Conclusions 8
References 9

Summary

The major difference of the natural gas market, which sets it apart from the truly global oil market, is that the former has historically been developed with respect to the regional supply bases. This was primarily defined by existing technology for natural gas transportation and availability of other ...view middle of the document...

Since 2005 when new technologies allowed production of the natural gas from shale in commercial quantities, the USA and Canada converted the region in self-sustainable in terms of natural gas supply (Table 1).

Table 1: Natural gas market balance for North America

Source: BP Statistical Review of World Energy 2012
Most of the natural gas transportation in the USA is done through 305,000 miles of transmission pipelines. Existing LNG degasification facilities allow for limited international trade of LNG (Table 2). Due to free market pricing when natural gas cost less in summer period, gas-storing facilities are widespread over the country including more than 400 underground storages and 113 LNG peaking facilities (EIA, 2008).

Table 2: Natural gas trade in North America

Source: BP Statistical Review of World Energy 2012

With the carbon emission regulations recently introduced by US government, natural gas is the most likely substitution to coal for electricity generation for years to come. Latest price reductions made natural gas from a cost perspective much more attractive than coal.

Recent spike in US and Canada shale gas production have reduced the prices in the region to historical minimum of less than $4/MMBtu, a half of the price for Europe and five times less the price for China or Japan. This difference in prices has raised huge interest to export of LNG from USA to Asian market. Out of country’s total 11 LNG receiving facilities, nine have asked for permission to be converted to export terminals, at least two have been conditionally approved (Energy and Capital. 2012).
Western Europe represents 17.5% of global consumption and 8.5% of global production of natural gas. Conventional natural gas is produced mostly in the North Sea region by Norway and The Netherlands. There are shale gas reserves in Poland, Germany, Ukraine and many other European countries. Development of the reserves is stalled by environmental regulations. Natural gas deficit is covered through supply from Russia and Algeria via extended transit pipeline systems and by LNG supply from Africa (Table 3).
Despite to significant drop in natural gas consumption, due to slowing economy and price spike, Western Europe is still strongly dependant on foreign supply, mostly from Russia. Some of the EU countries, like Germany and Poland, are connected to the trans-continental pipeline systems like Druzhba or North Stream. Russia is persistently looking for increase of its share in Europe to supply natural gas to Eastern Europe and Italy.
Table 3: Natural gas market balance and trade for Western Europe

Source: BP Statistical Review of World Energy 2012

Russian monopoly Gazprom exports gas to Europe under long-term (up to 25 years) contracts that typically based on inter-governmental agreements. Underground gas storage facilities...

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